Mortgages

How Mortgages Work

  • A mortgage is a loan you take out with a lender for a number of years
  • The length of time over which you have a mortgage is called your “mortgage term”
  • Mortgage terms can be anywhere between 5 and 40 years
  • A mortgage is a type of secured loan, which means it’s secured against a property - usually the property you want to buy with the mortgage
  • Using a property as security for a loan means that the lender can repossess it if you don’t keep up the mortgage payments
  • To take out mortgage, you must put down a mortgage deposit of at least 5% of the purchase price – the mortgage itself makes up the rest

About Mortgage Interest Rates

  • When you take out a mortgage, you’re given an introductory interest rate for the first few years – typically between 2 – 5 years
  •  A popular kind of interest rate for first-time buyer mortgages is a fixed rate, which is where interest is charged at a set rate for a certain period.
  • Fixed rates are particularly good for those who like to budget
  • After the introductory period ends, you’re transferred onto your lender’s SVR (standard variable rate), which is the interest rate they set themselves
  • The lender’s SVR is normally higher than the introductory rate, so you would often remortgage onto a new product with a new lender when your introductory deal ends or take a new product with your existing lender 
  • To take out mortgage, you must put down a mortgage deposit of at least 5% of the purchase price – the mortgage itself makes up the rest

Paying Back Your Mortgage         


You pay back your mortgage with interest.


There are 2 main types of mortgage which determine how you pay the lender - repayment and interest-only:

With a repayment mortgage, you pay back a bit of the outstanding mortgage balance – i.e. the amount you borrowed each month alongside interest payments.

HouseFront

With an interest-only mortgage, you only make interest payments each month and repay the full mortgage at the end of the mortgage term.

ColourHouses